Closing summary: China sends world market into a spin

China has been a major contributor to economic growth and low global inflation for more than two decades.

But tonight, investors around the globe are catching their breath after one of the worst day’s trading in many years. They’re now pondering whether today marks the start of a new and alarming phase of the crisis which began some eight years ago.

Mohamed El-Erian, former CEO of Pimco, believes today’s rout has sunk any prospect of US interest rates being raised next month. But he doesn’t believe we’re heading into a major crisis.

El-Erian told Bloomberg TV tonight:

“I’m not a buyer that this is the crisis of all crises.

Yes, this is a very unpleasant repricing, very unpleasant. And it’s going to go quite deep, but it’s not going to derail the economy in a major way.”

A board on the floor of the New York Stock Exchange showing the Dow Jones Industrial average at the end of the trading day. Photograph: Justin Lane/EPA

And while today’s losses are sizeable, they’re not among the worst losses in market history. For all the talk of Black Monday in China, and gloomy photos to match, this was more of a correction in Western markets. One to remember for years to come, though.

In a few hours, Asian markets will reopen; investors could drive a recovery, or send markets deeper into the red. We’ll have a new liveblog up and running to cover the action.

Our economics editor, Larry Elliott, argues that today’s crash isn’t just about China; it’s about fears that central banks are preparing to reduce their stimulus measures:

Financial markets in the west have been booming for the past six years at a time when the real economy has been struggling

Recovery from the last recession has been patchy and weak by historical standards, but that has not prevented a bull market in equities.

The reason for this is simple: the markets have been pumped full of stimulants in the form of quantitative easing, the money creation programmes adopted by central banks as a response to the last crisis....

There are many reasons why world stocks slumped today, but the underlying fear is that central bankers lack the ammunition to prevent a major crash.

Here’s the Guardian’s take:

Potential disruption to the iron ore trade; the sudden exposure of the South African rand; the incompatibility of Xi Jinping’s anti-corruption drive with that Wild East entrepreneurial spirit which has powered decades of Chinese growth. Watching panic spread from Shanghai and Shenzhen to London and New York, western analysts grabbed for straws of understanding in unfamiliar fields, reflecting not only a professional need to look as if they know what’s going on, but a psychological yearning to impose order on a wild, mercurial swing in the mood. There may be no single reason why August 2015 proved the moment for the world’s investors to take collective fright about the People’s Republic. What there is however, lurking under all the anxiety, is a single question for governments everywhere. Namely, what’s left in the locker?.....